Star CEO Guthrie

Growing new channels in China

Since Michelle Guthrie took over as CEO of Star Group in late 2003, she has steered the Asian pay-TV company into profitability amid dynamic market changes.

The News Corp. division now operates 58 channels in eight languages watched by 100 million Asians per day, mostly in India, with a total reach of 300 million viewers in 53 countries. Under her leadership, Star posted its third year of profitability and double-digit growth in operating revenue recently and has launched 11 channels in the past two years, such as Star One and Star Utsav in India.

The Chinese-Australian executive spent three years in business development at Star before she became CEO. Previously, Ms. Guthrie, 40, spent ten years with pay TV broadcasters like FOXTEL in Australia and BSkyB in the U.K. Prior to that, she was a lawyer at Allen, Allen and Hemsley in Sydney and Singapore, where she focused on the media and technology sector.

It’s no accident that News Corp. Chairman-CEO Rupert Murdoch turned to a savvy lawyer to replace his son, James, at the helm of his conglomerate’s business in Asia/Pacific, the world’s fastest-growing multichannel TV market in the world, according to PricewaterhouseCoopers (James moved to London in 2003 to run Murdoch's BSkyB U.K. satellite TV operation) . The region’s two largest markets, China and India, will create more than 80 million new multichannel homes over the next five years, boosting revenue in Asia’s pay-TV revenue to $366 billion by 2008.

“She’s got a strong business background, so she understands the regulations and legal issues necessary to run a media company in markets like China and India. Plus, she has a lot of patience,” said Hong Kong-based Marcel Fenez, who leads PWC’s entertainment and media practice in Asia/Pacific.

The company’s strongest market is India, where Star Plus, the No. 1 cable channel for the past five years, airs 44 out of top 50 shows on air, such as a Hindi version of “Who Wants to be a Millionaire.” Last year, Star introduced four of its Indian channels--Star Plus, Star One, Vijay and Star News--in North America to reach the two million-strong South Asian diaspora in the U.S.

The company’s growth in China has developed more slowly. Star has made limited inroads with music-focused Channel [V] and Xing Kong Wei Shi, a Mandarin-language entertainment channel that is now the leading regional channel in Guangdong, a wealthy province just over the border from Hong Kong. But 24-hour distribution for Xing Kong is limited to a scant five million households in that southern Chinese province, as well as upmarket hotels and housing compounds in the rest of China.

“It’s certainly important for Star to have a strategy for each market, because each country is different. India’s pay TV market is further along [compared to China] but its ad market is way behind, considering the size of the country. We’ve still got a long way to go,” said Ms. Guthrie.

Getting Star on pay-TV platforms across China has been a corporate mission for years, prompting Rupert Murdoch to take enormous steps to court China’s broadcasting authorities. In 1994, he dropped BBC World from Star’s platform after a series of programs upset the country’s political leaders. And News Corp.’s publishing operation HarperCollins backed out of publishing a book penned by the former governor of Hong Kong, Chris Patten, that was critical of China’s leaders.

Such measures haven’t helped News Corp. develop in China more quickly than other foreign broadcasters. In fact, Star is now being investigated by Chinese authorities about inproper distribution practices. Ms. Guthrie declined to comment on the inquiry, but said she recently took over direct responsibility for News Corp.’s Chinese operation after Jamie Davis, previously News Corp.'s president-China, relocated to Singapore as managing director of ESPN Star Sports last summer.

“China doesn’t have a proper pay-TV market, because average monthly fees are eight to 10 RMB ($1-1.20), so none of the channels are being paid and they are not put together specifically for cable. But it’s inevitable that the market will develop in a country where you see people paying 25 RMB ($3) for a cup of coffee at Starbucks, and we know there already is great demand for better programming,” said Ms. Guthrie. “But I can’t tell you when or on what terms China’s pay TV market will be developed.”

Along with regulatory changes, Asia has witnessed dramatic technological advances that create new opportunities in direct-to-home distribution. Last summer, Star launched several channels like Star World on PCCW’s Now Broadband TV platform in Hong Kong and both China and India have embarked on an ambitious infrastructure projects to develop digital TV networks supporting interactive services.

“Apart from TV broadcasting, we have leveraged our content into different formats including DVDs, online and mobile services. The licensing and distribution of our more than 20,000 hours of Chinese and Indian programming has enabled us to tap into new markets and create additional revenue streams from outside of our core television business,” she said.

Cheat Sheet

Who? Michelle Guthrie, CEO of News Corp.’s Star Group based in Hong Kong

Top tip for foreigners in China? Don’t believe everything you read about China. When I meet with analysts in New York, I always tell them, you’ve got to visit China to see it for yourself.

Which Star advertiser is the most innovative? Samsung. As I travel across Asia and see brands they’ve built up, it’s incredible what they’ve done here. They’re very aggressive and committed to getting deeply in the market.

What type of programming would you like to see more of on Star? I’d like to do more life-style programming, especially in China, people are starting to spend more money on improving their living environments and themselves. But we’ve got to pick the right time to make sure it’s mass market enough.